Current ratio is the ratio of current assets to current liabilities. An ideal current ratio is 2:1. It is a part of the liquidity ratio that measures the ability of a firm to pay off its short-term obligations. To calculate: The new current ratio after each given transaction stated below: $6,000 paid for accounts payable. Delivery truck purchased for $10,000 cash. $2,000 written off as bad debts . $25,000 paid for previously declared dividends.

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Chapter 13, Problem 13E

To determine

Introduction:

Current ratio is the ratio of current assets to current liabilities. An ideal current ratio is 2:1. It is a part of the liquidity ratio that measures the ability of a firm to pay off its short-term obligations.

To calculate:

The new current ratio after each given transaction stated below:

$6,000 paid for accounts payable.

Delivery truck purchased for $10,000 cash.

$2,000 written off as bad debts.

$25,000 paid for previously declared dividends.

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